BP's fledgling wind power business to launch new projects

BP ready to catch the windDivision has a bevy of projects in the works

TOM FOWLER, Copyright 2007 Houston Chronicle

Published 6:30 am, Friday, January 12, 2007

Photo: David McNew, Getty Images

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San Gorgonio Pass in southern California is one of the locations where BP's wind power business plans to invest.

San Gorgonio Pass in southern California is one of the locations where BP's wind power business plans to invest.

Photo: David McNew, Getty Images

BP's fledgling wind power business to launch new projects

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BP's year-old wind power business plans to launch a host of new projects by year's end, showing how a major oil company can quickly move into the ranks of major wind companies.

Power output from the individual projects, which the company will announce today, tends to be somewhat smaller than typical plants fired by natural gas or coal. But it's another sign of the growing enthusiasm for renewable power.

"This is a profitable business for us today," said Bob Lukefahr, president of Houston-based BP Alternative Energy North America. "Finding resources and bringing them to market on a large scale is a core function of BP, so over time these will become even bigger projects."

Less than 1 percent of the country's power comes from wind, but it is the second-largest source of new power generation projects in the U.S. behind natural gas. Some 2,400 megawatts of new wind power were built in 2005, and about 3,000 megawatts are expected in 2007.

BP plans to bring online up to 550 megawatts of wind power this year. One megawatt can power as many as 800 homes.

Texas has seen some of the nation's heaviest wind development activity. In 2006, it passed California as the state with the most wind power generation, with 2,631 megawatts of capacity.

The possibility that Congress may propose some system of taxing carbon dioxide emissions as a way to reduce greenhouse gases has encouraged companies with deep pockets to get into this business.

GE Energy Financial Services, an arm of the giant GE Corp., for example, has about $1.5 billion invested in renewables, 70 percent of that in wind. The company said it hopes to increase this portfolio to $3 billion by the end of 2007.

Colorado project

BP is aiming to turn power renewables into a $6 billion a year business within the next decade.

In addition to wind power, BP Alternative Energy includes a large-scale effort in Scotland to turn natural gas into hydrogen to run a 350-megawatt power plant and store the resulting CO2 undersea, as well as a similar project with using petroleum coke in Carson, Calif.

The BP wind project that is furthest along is in Cedar Creek, Colo., with a planned peak capacity of 300 megawatts. The venture with developer Babcock & Brown is scheduled to start by year's end. Others include the 65-megawatt Silver Star project in Erath County, Texas, being done with Clipper Windpower, and two with unnamed partners: a 100-megawatt project in West Texas and a 65-megawatt project in North Dakota.

Another project in San Gorgonio Pass near Palm Springs, Calif., shows just how far wind turbine technology has come in recent decades, Lukefahr said. The pass is home to one of the earliest large-scale wind farm projects in the country, with 4,000 turbines. The company is replacing 139 older units that generate about 11 megawatts of power, with four new ones that will have the same output with greater reliability.

Critics of wind power point out that because of the vagaries of the weather, wind turbines' average capacity factors — the percentage of time they are spinning — are about 30 to 40 percent depending on the location. This compares with capacity factors of 80 to 90 percent for natural gas and coal plants.

Lukefahr said the industry is well aware of the issue and developing ways to overcome it, including building gas-fired plants in tandem with wind projects to make up for the lulls, considering large-scale battery projects and improving weather prediction techniques.

"Wind accounts for 20 percent of capacity in parts of Europe, and their grid hasn't collapsed," Lukefahr said. "When we get up around the 10 to 15 percent range here, then we should start to worry about those issues, but for now I think the problem is overstated."

BP's Alternative Energy business was formed in November 2005, bringing together two existing wind projects in the Netherlands with other "low carbon" power projects around the world, including the company's large solar power business, based in Maryland.

BP's North American wind business started when the company studied oil and gas production properties it owned in particularly windy areas in West Texas, Wyoming and Montana. The company has put up towers that collect meteorological data.

Like the oil business

"The wind business is like the upstream oil and gas business in a lot of ways," Lukefahr said. "You're trying to acquire attractive acreage, it's like shooting seismic when you put up the (meteorological) towers, and if the resources look attractive, you try to get them to market by building the transmission lines to them, much like you'd build out pipelines."

In 2006 BP cut two deals that gave it a strong foothold in North America: the purchase of wind project developer Greenlight Energy and a strategic alliance with turbine manufacturer Clipper Windpower. In December BP also acquired independent developer Orion Energy.